Microsoft Antitrust Agreement Spurred Innovation, U.S. Says

By Sara Forden -
May 12, 2011

Microsoft Corp. (MSFT)’s nine-year-old
antitrust agreement with the U.S. Justice Department, set to
expire today, permanently changed the software marketplace,
making it more open, fair and innovative, the agency said.

The final judgment in the Microsoft case, in effect since
2002, prevented the company from using its monopoly Windows
operating system for personal computing to quash competition,
the department said yesterday in a statement.

The court’s decree “helped create competitive conditions
that enabled new kinds of products, such as cloud computing
services and mobile devices, to develop as potential platform
threats to the Windows desktop operating system,” the
department said.

The Justice Department, joined by 19 states and the
District of Columbia, sued Microsoft in 1998, alleging the
company unlawfully protected its Windows monopoly by keeping
computer makers from promoting browsers that competed with
Microsoft’s Internet Explorer.

The government contended Microsoft hindered access to the
Netscape Navigator browser because its Java programming language
let programmers write applications that ran on any operating
system, not just Windows.

“Microsoft got into antitrust trouble because it fell
behind as an innovator and then tried to catch up by flexing its
Windows monopoly rather than competing on the merits,” said
Andy Gavil, an antitrust professor at Howard University Law
School in Washington. “It did that most extremely with Internet
browsers and media players.”

New Software

The settlement protected development and distribution of
new software and barred Microsoft from continuing the behavior
that triggered the antitrust lawsuit.

“Our experience has changed us and shaped how we view our
responsibility to the industry,” Microsoft spokesman Kevin Kutz
said in an e-mailed statement. “We are pleased to bring this
matter to successful resolution.”

Microsoft submitted to court oversight of its practices
under a decree issued by U.S. District Judge Colleen Kollar- Kotelly. The supervision included periodic reviews to ensure the
company complied with terms of the settlement to give computer
makers freedom to promote rival products.

Still, Kollar-Kotelly said at the last oversight hearing on
April 27 that the compliance committee had worked well and could
be used as a model for cases in the future.

The European Commission accused Microsoft in 2004 of
abusing its dominant position by deliberately restricting the
ability of non-Microsoft software on larger computers to work
with its Windows operating system. Microsoft’s bundling of the
media player with Windows was also deemed unfair by the
Commission, which fined the company a record 497 million euros
($706 million), ordered it to share secret programming data with
competitors and offer a version of Windows without a music and
video player.

“The most important thing about the case was that it put
Microsoft under incredible scrutiny for how it was going to
treat firms coming to life around the browser,” said Timothy Wu, an information industries scholar from Columbia University
who is on leave to advise the U.S. Federal Trade Commission.

Wu said the antitrust case helped Internet companies such
as Google and Facebook Inc. flourish, while products such as
WordPerfect and Lotus 1-2-3 software lost momentum due to
Microsoft’s dominance.